The Poverty of Philosophy, Engels' Preface To The First German Edition (1885) - Part 11 of 14

Of course, if this were the end of the matter, there would still be an equality of aggregate demand and supply, in line with Say's Law, which is why Ricardo concluded that, although individual commodities might be overproduced, there could be no general overproduction, because others would be, likewise, under-produced, and market prices would adjust. However, it is not the end of the matter, as Marx describes in Theories of Surplus Value, Chapter 17. The demand for money can exceed the demand for other commodities, i.e. increased saving/hoarding.

“At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money, exchange-value, is greater than the demand for all particular commodities, in other words the motive to turn the commodity into money, to realise its exchange-value, prevails over the motive to transform the commodity again into use-value.”

(Theories of Surplus Value)

But, also, the consequence of prices falling, in one sphere, may be that the capital cannot be reproduced. Firms lay off workers, they have no wages to spend so aggregate demand falls, and, in spheres where there was no overproduction, now there is. Just because demand is higher in other spheres does not resolve this because capital and labour is neither interchangeable, nor, instantaneously transferable.

The process described by Engels explains fluctuations in market prices, around the price of production, and, also, the longer-term movement of capital from one sphere to another, but not the sudden overproduction of commodities, which may or may not be accompanied by an overproduction of capital, though the latter always involves the former.

“Only through the fluctuations of competition, and consequently of commodity prices, does the law of value of commodity production assert itself and the determination of the value of the commodity by the socially necessary labour time become a reality. That thereby the form of manifestation of value, the price, as a rule looks somewhat different from the value which it manifests, is a fate which value shares with most social relations.” (p 19)

Money and competition effect this, because it is only those who produce commodities of the quality required, in the quantity for which there is effective demand, who have the labour expended validated by the receipt of money for them. As Marx sets out in A Contribution To The Critique of Political Economy, it is precisely in this way that all labour is reduced to universal labour, and money is its equivalent form. This is in contrast to Proudhon, Rodbertus and the modern statists, with their demands for nationalisation, who would hand out such notes, willy-nilly, whether the labour expended was necessary or not (or with UBI, lockdowns etc., even took place), The same is seen with the proponents of MMT, and it was this nonsense that was at the root of the economic collapse of Stalinism.

“To desire, in a society of producers who exchange their commodities, to establish the determination of value by labour time, by forbidding competition to establish this determination of value through pressure on prices in the only way it can be established, is therefore merely to prove that, at least in this sphere, one has adopted the usual utopian disdain of economic laws.” (p 19)

Whether it is a commodity producing economy, in which competition, and so the movement of prices, and allocation of capital, is prevented, or a Stalinist command economy, in which production and prices are administratively determined, the consequence must be the same. Supply will not coincide with demand, and so shortages in some spheres will occur alongside large gluts in others, as well as overall periods of shortage and glut simultaneously, leading to the development of black markets.

“Only through the undervaluation or overvaluation of products is it forcibly brought home to the individual commodity producers what society requires or does not require and in what amounts. But it is precisely this sole regulator that the utopia advocated by Rodbertus among others wishes to abolish. And if we then ask what guarantee we have that necessary quantity and not more of each product will be produced, that we shall not go hungry in regard to corn and meat while we are choked in beet sugar and drowned in potato spirit, that we shall not lack trousers to cover our nakedness while trouser buttons flood us by the million – Rodbertus triumphantly shows us his splendid calculation, according to which the correct certificate has been handed out for every superfluous pound of sugar, for every unsold barrel of spirit, for every unusable trouser button, a calculation which “works out” exactly, and according to which “all claims will be satisfied and the liquidation correctly brought about.”” (p 20)

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